Reserve Bank shareholders do not hold sway, but add a degree of transparency
You may think being a shareholder of the Reserve Bank would give you the rights shareholders have in any other company. You would be very wrong.
You would have no power to appoint the leadership of the Bank. The governor and the three deputy governors are appointed by the president. You’d have no control over how the profits are distributed.
Shareholders get a legislated dividend of just 10c per share. With 2-million shares in issue, that’s a total annual dividend of R200,000. You, or collectively with your associates, would not be allowed to own more than 10,000 shares, or 0.5% of the bank, which is a legislated limit.
Anyone can buy shares. They last traded for R3, and at that price, buying your full quota would cost you R30,000, though just one share would be enough to exercise most of the rights you get.
You can acquire shares through a facility on the Reserve Bank’s website.
But spending that money would get you no say in how the Bank conducts monetary policy or bank supervision, both of which are dictated by the Constitution and legislation.
You do have the right to vote on seven nonexecutive directors of the bank, but the president, in consultation with the minister of finance, can appoint four, which added to the four executives, means that the president’s appointees control the board.
Shareholders do have the right to appoint the auditor of the Bank.
They also have the right to attend an annual shareholder’s meeting, where the governor must report on the operations of the Bank and some aspects of the economy and monetary policy. There might also be cookies and tea.
Shareholders also get an annual report that outlines the activities of the Bank, but so does the public.
So, what is the point of private shareholders in the Bank? The only thing they achieve is a degree of transparency.
The audit is currently done by PricewaterhouseCoopers and SizweNtsalubaGobodo, who must account to the shareholders. The nonexecutive directors they appoint have insight into the continuing activities of the Bank. But they still have to pass an assessment of whether they are “fit and proper” for the positions. They also have to satisfy various “expertise” requirements such as having deep insight into agriculture or industry in the country.
Their presence on the board is intended to infuse it with some insight from different economic role players and add transparency.
So, when the ANC decided to “nationalise” the Reserve Bank at its policy conference last week, it was making a decision to do away with this function. To do away with transparency and linkages of the Bank to the private sector that is achieved by the shareholder structure.
Confusingly, though, this doesn’t seem to be what the ANC delegates had in mind. Enoch Godongwana, the party’s economic policy supremo, told journalists, “It is an anomaly that an institution like the Reserve Bank should be in private hands ... the independence of the Bank should be guaranteed”.
This statement is very strange. The claim that the Reserve Bank is “in private hands” is completely contradicted by the facts about the rights of shareholders. Given that the majority of the bank’s board, and all of its executive directors, are appointed by the president, it would be much more accurate to say that the Reserve Bank is “in the president’s hands”, although current executive appointees all have terms running until late 2019.
And Godongwana’s claim that “the independence of the Reserve Bank should be guaranteed” is surely not an argument to remove the rights of shareholders. If independence of the Reserve Bank is what we want, then that is an argument for exactly the role that outside shareholders play. They restrict untrammelled political control of the Bank.
Did the delegates at the ANC’s policy conference really understand what rights Bank shareholders actually have?
My suspicion is they did not, which would amount to a very poor way of forming policy.
One would hope that policy was made in the context of significant research into understanding what the status quo is and what the likely outcome of changes to policy would be.
Perhaps that is because the ANC is no longer an institution that is serious about policy. It is now an institution riven by factions, with one in particular determined to extend its power to every institution of society, consequences be damned.
The nationalisation of the Reserve Bank should be seen in that light — there is no policy objective, other than to frustrate, intimidate and harass the Bank.
The Bank enforces exchange control and controls who may own banks, both of which are potential threats to the Gupta family. This has nothing to do with policy and everything to do with the kleptocratic capture of the state.